is an increasingly large backlog. >> may i comment on that as well, president? i thought that was a really excellent question. in listening to the conversation i am reflecting back on my arrival at the port when we were dramatically cutting our budget i think from the first 10 days i was here we cut it by 20 percent, which was very painful. and if you were to look at a 5 year projections then the numbers much much more horrific than it is now and i think the lessons learned in the historical presentation is really important and it has been that the capital plan has really helped us to guide our investments but also to guide our negotiations with our regulatory partners to be more persistent and effective in seeking grant funds when with we have been shut out in the past and one example of that has been with respect to

expenses of the ship repair yard and the water basin that is there, they have worked very hard to try to get us reclassified from a federal perspective to be eligible for those grant funds. in 2006 our capital plan showed that we would lose 8 piers. one of those piers was pier 38, we now have a new plan for that. one of those piers was pier 31, we now have a new plan for that, and we continue to work at these things. with but as we went along negotiating the master permits for both the cruise ship terminal and the america's cup, worked very very hard to try to direct those investments into state of good repair. some of those investments were the removal of derelict facilities, piles in the pier 64 area, and those are really important as well but making sure that we

now one of those repairs was repairs to the aprons around pier 19 which has a dual purpose of giving us exiting to be able to put more population in pier 19 and that has a direct public benefit for public access but also a revenue benefit. i think the steps we have taken over the last 5 years culminating with the sdig of the council of designation of capital has helped drive those conversations and what you have focused on is we're not done, it wasn't that magic bullet we really need it to be, but i hope that looking backwards gives you confidence that we have the ability to look forward and take action, it's just not going to be easy. >> still a few of my closing remarks. >> please reiterate for the record, it would be music to my ears. >> i really want to commend you and the staff and also led your team for the way you put

it together, but i really do, having seen and probably kim you know better than any of us where we've been and where we are today, it really does reflect a tremendous amount of work and effort. the concerns that we've all raised have been thought about and we are investing well so i want to thank you and your staff. >> i'd like to make one more comment to be clear. i think in terms of what i think would be good for the commission and the staff as far as the next step is concerned, i always hi it helps to do the what-if scenarios and what the options are. i think we're making the case today we have to look a little more urgently and dramatically to be sure the trend lines mirror more what we've seen in the past and i appreciate you've put a lot of conservative assumptions and you have mentioned that management interventions will be necessary, so i think the request i would make is that if you could look at the variables and say, and the ones that you mentioned, what would they and

then it helps you to prioritize, what you should work on faster in terms of what you've put in as a base line. perhaps this could be brought back to the commission in another 6 months so you could see with the benefit of more thinking and more analysis and to work with the real estate division on a little bit more granular basis and make everyone aware whether it's in maritime or real estate what are some of the stones that can be unturned, turned over to be looked at. this is really everybody involved from this stand point to work forward. it's nice to have a goal, it's a little bit different from the public sector from the private sector, but you are getting close to a hundred million. i would challenge you, how close can you get to a hundred million in revenue, maybe better than this forecast. >> thank you, those were excellent suggestions. >> i'd just like to make a

comment. great questions, great answers, very great report. you may not have this information for me right now but maybe you can get it. how much approximately or what percentage do we put back into the ports every year like for structural repairs and all that stuff, do you have any idea? or you can answer that another time. >> i think we'll be able to answer that in the capital plan item, there's a table to that effect. but our policy is to try to reinvest 20 percent of our operating fund. >> so it's about 20 percent. >> it's between two years, the current budget and what we've designated as capital so what we set aside for the next year. the actual capital budget is not 20 percent of the revenues, but we are moving to 25 percent per year policy in 2018 so that

will push us closer to that. when marilyn goes over it she can show you exactly the percent going to the capital budget. >> you can't, it's being recorded, megan >> probably over the last 5 years we have averaged around 13 million dollars a year, anywhere between 10 on the low end and even over 15 million on the high end over *fr for a 5 year period. >> okay, just curious. the other question i had, may be in here somewhere and maybe i've missed it, you say your percentage of -- your vacancy rate now for everything in the port, parking, restaurants, piers? >> i can answer some of it. >> is there any room there for

revenue? >> you dpbtd miss -- didn't miss it in the report, we didn't cover vacancy rates. between our executive director we can get that to you but i don't have it on the tip of my tongue. >> i can tell you. overall vacancy rate for all products is about 8 percent if i recall correctly. in warehouse space it is 0.03 percent, we have virtually no warehouse space left except for some very odd configurations. we have zero restaurant space that is vacant although we have a restaurant that is under construction, that's the former jelly's so we should see those revenues come online and we have a restaurant that eventually we will inherit from the redevelopment agency that's in bankruptcy right now so there might be a opportunity right there. we have a vai tail retail space opportunity at pier 33 which you will be

hearing about at your next commission meeting, but more or less those vacancies are pretty low. i forget the office vacancy rate number. and i don't believe we have any parking stalls that are vacant but we mostly sell parking on an hourly basis per our permits. i think that covers most everything. then on the maritime side there's capacity at the car go facilities probably. >> how about on the ship repair side of it, can that be expanded? >> that's a great question for a director of maritime. >> i *r and i think if nate could tell us what assumptions for vacancy did you put in the forecast. >> in the ship repair capacity in the last 5 years it's grown. the total revenue by ba systems has gone from there 35

million to last year about 60 million, so we have really grown that business to unprecedented levels. there's a finite amount of days with the dry docs we have. if we could get another dry dock forward that could help but right now it is reaching into the high part of its utilization. >> nate is going to answer a question. >> i think what we'll do is a table that details the vacancy rate of the various facilities and send that to the xlition. it is going to be in the report you will hear in two weeks but neither nate and i can remember the figures but we were just working on the figures so we'll get it over to you. >> nate cruz with the real estate division. the vacancy assumption for the forecast that you have been presented

with is basically a stable rate, i don't recall the exact percentage, i apologize for that, but it includes a similar, very, very low vacancy rate which the director just pointed out. i did also want to point out, we talked a little bit about granularity of forecasts, our budget forecast has been within 2 percent and the methodology we have kept true in prior periods. where i was a little too conservative was the parking forecasts and based on conversations we have had in former years i got a little more aggressive and hopefully we will see a tighter performance of budgity to actuals in the future. >> the question would be the leases. did we have some leases executed a long time ago and even with cip increases if they were to come online today

would the jump be a little bit more than cpi >> i think in some cases it certainly would and in some cases we don't know. the individual leases which will expire in the two-year budget window we don't individually address what might or might not happen to thep. as a general assumption we assume those leases will continue on either under the current tenant's name or be released under similar terms to someone else. i am a little wary about turning the dial up in aggressiveness because we want to make sure we don't overbudget and have to do mid-year. >> maybe i'll ask the question in a different way. is more coming off lease or expiring than it has in the past? i hear what you are saying in terms of actual versus budget, it's been very close, but if a higher percentage is coming on

scream for renewal or exploration, then that will change your forecast. >> i appall apologize, we look at how much revenue is still under contract in the near future. we can provide you with that analysis. >> so you do have a system in place to evaluate these leases every couple years or something like that? >> we do the continual disclosure an sully so we take a look at in chunks how much might be expiring in the near future. >> all right, thank you. >> call the next item. >> item 8b, request approval of the port's 10 year capital plan for fiscal year 2015-2024.

>> good afternoon, commissioners, i'm ann cary, i'm on assignment to the port to do this year's capital plan. i'd like to acknowledge my predecessor, daly dunham who essentially designed the plan and has carried it for many years and now i have inherited it full-blown which has been a big help, a great starting point. also the direction i received from elaine forbes and brad benson and the invisible hand of your director elaine. >> not so invisible. >> this is an approval item if you choose to approve it today. in the array of all the financial items, it's the capital plan. unlike the 5-year financial project which you just heard which contains the trends and financial

projections for the entire enterprise or the upcoming plan the capital plan focuses on capital investments over the next 10 years and as such is more a strategic planning document and reflects the port's values and i'm new of this so hope it goes forward. as you see on the next page, we've got the history really. i think that elaine eluded to this, that the capital plan represents a guiding document, it provides an estimate of the amount of capital investment needed to maintain the port's facilities in this state of good repair which we have talked a little built about and you will hear a lot more about, over the next 10 years. it has a plan of financial which maps out the port intends to utilize the potential and new sources of funds to

maintain the assets and enhance our portfolio. it also has an estimate of the capital need that remains at the end of that 10 years and some of the strategic issues that may pose a significant challenge to the port in the future. every two years the city adopts its own city-wide capital plan and the port's plan becomes a part of that which is very helpful to assure the partnering opportunities and go bonds and things like that. the next update to the city's 10 year plan is in 2015 so we are doing this for the port's benefit only this year. so the plan has guided nearly $196 million in non-developer funding since the inception in 2006. some of the highlights from the port's 150's anniversary year include the project's listed here, you have

heard them mentioned before so i won't go through them again, but they are very significant achievements. the project expenditures are reflected in the changes in the port's financial position that elaine described earlier. the criteria were used to set investment priorities and to allocate the capital funds to specific projects in the capital budget. the first criterion which is listed here emphasizes the importance of maintaining revenue-generating assets to build future capacity, that is keep building assets that we can lease out and generate more revenue and support bonds and make more investments and just that whole cycle. so that's a very high priority we've tried to focus a little bit more on this year.

the other criteria reflect the public's trust such as good stewardship, increasing public access particularly with new parks and open spaces that are also improving quality of life for the city, and building partnerships that leverage external sources. as we'll see those partnerships and external resources play a very important role in addressing the capital needs identified in this year's plan. so now to the numbers frplt the port staff utilizes the city's data base to track all of our capital needs and every year we update that data base, which is what's arrayed in this table here. we start with the prior year plan in this case it was 2014-23 where we've completed projects we delete those costs from the various elements, we may have also completed a project at a lower cost and the entire cost

estimate comes out even if we spent less. sometimes there are project savings that also reduce the backlog. similarly new cost estimates are loaded in. most of those this year are associated with the development projects. where there are more detailed design and engineering estimates for those projects as they have become better defined going forward. some of them have increased and some have decreased so it goes both ways. similarly during the 10 year plan we added a new 10th year, the prior year drops off, sometimes rolls into backlog, we gain a new 10th year and finally the controller's office identifies the costs used in the plan and that's based on construction cost indexes. this indicates the need for capital investments, the changes are not necessarily actual expenditures so this is

really just a cost table. and at the bottom even with all of these adjustments the port's 10 year need remains relatively unchanged from last year of 1.59 billion dollars and i'd note that at current spending lechls we're just barely holding our ground year over year as inflation and renewals add to the costs and as we work projects off. there's another 463 million dollars in what we call conditional seismic work and that may or may not be required to be made over the 10 year period. so as such we treat it, we show it separately but we don't add it into the total need and i'll talk a little bit more about what triggers seismic. in the pie chart it shows a breakdown of those elements again as maintained in the data base for state of good repair, our 1.6 billion dollars is broken into the three elements, the backlog, which essentially equals our deferred

maintenance, what's already on the books, what we haven't done, it's not the same as the capital appreciation number that elaine referred to. in fact, this number isn't part of hers, hers really reflects the next item, which is the renewal. so as we go forward over the next 10 years we expect some systems to wear out and have to be replaced, that's what the renewal costs represent, costs we will incur for our existing facilities as they age and as they require repair or replacement. there's also a category called one time. these are non-cyclical items, i'd note that for example we have a big project in here for repairing the under pier utilities. that's not a, it's not driven by annual renewals, and sometimes driven by code changes and such, so these items we are characterizing as

one time and note that in some cases they are backloged and in some cases they are things that will incur in the future so we'd like to do a better job going forward of trying to parse those out and throw them into one bucket or another but for now they are kind of a big category called one time. again that seismic item is the conditional cost which may or may not be required and that depends on whether there is a change in use or a major rehab of a facility that would trigger building code requirements that we would then have to do seismic. because we don't know at this time if and when seismic will be triggered and sometimes we try to define projects in a way that does not trigger the seismic need, we try to add it into our need of good repair needs. we continue to refine these as we get updates from facility

assessments and as repairs are completed so we expect to number to continue to change from year to year and again i might note that the costs could go up and they could go down. hopefully we see them go down. so now to the money side. the sources of funds, we have identified that 1.14 billion dollars in the 10 year period and this year we've tried to take this slightly different characterization of it and broken it into these two broad categories. the first is shown in blue are the internally generated funds, that is sources that are primarily within the port's control utilizing our existing assets. so, for example, the annual allocation from the operating budget is here and the port debt that's supported with our port revenues. also tenant improvements, a number of tenants with long-term leases have responsibility for maintenance and capital improvements such as this building and pier 1, the ferry

building fisherman's wharf areas. in the aggregate those sources are projected to generate 37 percent of the total revenues in the plan. in green we now see what we call externally generated funds, that is those sources that require some sort of partnership with an external party, for example the general obligation park bonds we have partnered with the city's sponsored we have partnered with rec and park. our federal, state and local grants are all reflected in those small pieces near the bottom of the circle and then development projects that are partnerships. those are not small money, a lot of them are tax increment that we can apply to the benefit of those project areas but the dwefrlment projects are very significant in terms of contributing all of 43 percent in the total funding in this pie and just to add up the two

slices that are port capital budget and bonds, that's about 16 percent over the course of the 10 years so to get to the point of how are we going to tackle this fairly large 1.6 billion dollar problem, our internal money is not going to do it alone, we really need to build these partnerships. i think it just demonstrates the importance of maintaining that strategy. another look at the uses -- now we'll turn to the uses of the funds. again we're trying to show the funds going towards not only state of good repair but in some cases there are enhancement projects that we will, that will be supported with these funds. for example most of the general obligation park bonds support new parks and open space that enhances public access to the water front. similarly the proposed development projects add new infrastructure such as roads, sewers, street lights, things

like that, that while those development projects may address a component of state of good repair they will also have an enhancement element to them so the funding is often split between them. it's analogous to the redevelopment projects, i think, those development projects that we're trying to sponsor with the ifd's that but for that project there would no tax increment to support those investments and those investments are necessary to increase the land value and support higher uses in those areas so they are a critical component. the next pie shows, is the same information arrayed a little bit differently and showing again where those, the uses of those funds go. i think the good news in this plan is that of that 1.4 billion dollars we're applying fully 59 percent of it to address that state of good repair need that we have. 34

percent is going to enhancements that's shown in the two green slices and then there's some that's going to seismic, the bulk of which is represented by piers 30 and 32. overall i think the plan strikes a good balance between maintaining state of good repair and making investments that enhance our assets and add value to the balance sheet. also you can discern in here the light blue sliels -- slice to the right shows most of the port's internally generated sources shows to state of good repair. the money we can control directly and generate with our assets we are putting back in our assets to protect that revenue base, whereas a lot of the enhancement projects are more dpepb dependent on those external sources. that's why we're putting them a little bit at risk if we don't continue to develop them.

projects scheduled to get underway within the 10 year period, all the components do have a component that addresses the existing backlog of repairs within the project area while two of the larger projects address seismic conditions or add enhancements such as streets and lights. the intention there is to use that increment to fund streets and sewers and lighting and sidewalks and parks so there's a lot of enhancement associated with that. the projects at pier 38 bulk head and the orton's pier 31 bulk head both apply to the (inaudible) shown here are entirely for the repair needs of those facilities. there will be additional expenditures there but they will not be on the

port's book but they are addressing a lot of the backlog for those two. taken together these 5 development projects, as elaine mentioned, fund 243 million dollars in state of good repair so they are making a significant contribution to our ability to work off that backlog. over the 10 year period, development projects represent 36 percent of the funding that we have identified for state of good repair so i think as it's stated in the waterfront land use plan, these and other dwefrlment projects remain the principle drivers and potential waterfront improvements. and perhaps one of the biggest risks to the funding strategy would be, as elaine mentioned, a change in the real estate market or a change in the political climate vis-a-vis waterfront development so we'll need to watch for that. oh, red. unfortunately there is some red in this plan. so this is the use plan

projects a greater amount of funding going towards the state of good repair projects than in previous years and that's represented by the blue bars at the top of the graph. as i mentioned we're funding about 42 percent of our total need in this 10 year period. if all of that funding that's projected in the plan is actually realized at the end of the period we'll still have met about 42 percent and we'll have about a $921 million dollar unfunded need and that's represented by the red bar at the bottom. again, the trend here is good in that it's getting smaller, but it's still a very, very big nut to cover. so as i said, the state of good repair at the end of this 10 year plan, state of good repair we would have a $921 million dollar need or backlog. we would also have seismic conditions which for the most part we haven't addressed because we don't know if they will be triggered, there is

some but there is potentially $385 million more and there's a number of emerging issues identified in the report that could add to this need. in particular protecting the seawall from sea level rise, what to do about our red and yellow tag facilities, there are a number of them outlined in your report, we need to continue to address the risks posed by our vulnerable underpier utilities in response to our agreement with the water board and we want to try and do something to reuse and revitalize our underused assets such as the southern waterfront and the ac34 venues and dredging of course is always a kind of tricky item, it seems to always go up in terms of costs and since it's funded out of the capital budget it continues to take a lot of that capital capacity that would otherwise be available to apply to state of good repair. so while